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Unbreakable Bond: PM and COAS’s China-Visit Reinforces Time-Tested Ties By Kashif Mirza

Byadmin

Jun 24, 2024

The writer is an

economist, anchor,

analyst and the

President of All

 Pakistan Private

Schools’ Federation

president@Pakistan

privateschools.com

The China-Pakistan relationship, emphasises the strength and resilience of their partnership. In a world of shifting geopolitical alignments and economic interdependence, Prime Minister Shehbaz Sharif along with Army Chief General Asim Munir’s recent visit to China is a landmark moment in Pakistan-China’s long-standing relationship. Army Chief General Asim Munir is a visionary leader and the main member of the Special Investment Facilitation Council (SIFC), a body created to attract foreign investment to Pakistan. Prime Minister Shehbaz Sharif paid his first official visit to China after taking office for a second term. China’s President Xi Jinping met Pakistani Prime Minister Shehbaz Sharif in Beijing, days before Pakistan presented its annual budget and applied for a new International Monetary Fund (IMF) loan. More than the technicalities, China’s investment in Pakistan is driven by considerations of strategy. The China-Pakistan Economic Corridor (CPEC) symbolises this relationship. Moreover, Pakistan has fully endorsed the Chinese position on Taiwan, and China has confined itself to repeating its old position on the maintenance of peace and stability in South Asia. This includes the joint opposition to unilateral changes in the region – a veiled reference to India’s deletion of article Article 370. Pakistan’s location on the Arabian Sea gives it strategic importance for China, providing an overland route out towards the Gulf of Aden and onto the Suez Canal, and enabling Chinese ships to avoid the potential chokepoint of the Malacca Strait. China, as always, firmly support Pakistan and safeguards its national sovereignty and territorial integrity and the two countries’ all-weather strategic partnership had broad development prospects. Beijing is willing to work with Islamabad to build an upgraded version of an economic corridor linking the two countries, China’s leader Xi Jinping told visiting Pakistani Prime Minister Shehbaz Sharif. Pakistan is in the middle of a debt crisis. As such, Sharif’s government is expected to seek at least $6 billion under a new IMF programme after it presents its annual budget. And the $27 billion or so that Pakistan owes China, according to World Bank data, is central to this next round of discussions with the fund. Xi also said that China would also help Pakistan with its economic and social development. In May, the IMF opened discussions on the new loan after Islamabad completed a short-term $3 billion programme, which helped stave off a sovereign debt default last summer. Pakistan owes China almost 13% of its total debt, which was taken on to pay for infrastructure projects over the years and other types of spending. Beijing has lent Islamabad almost twice as much as its second- and third-ranked multilateral lenders, the World Bank and the Asian Development Bank, to which Pakistan owes $16.2 billion and $13.7 billion respectively. Chinese firms have also invested a further $14 billion in Pakistan since a new economic corridor connecting their countries was announced in the summer of 2013 as part of Chinese President Xi Jinping’s flagship Belt and Road Initiative, data from the American Enterprise Institute think tank shows. Most of that investment was made by Chinese state-owned energy companies financing fossil-fuel and nuclear power plants, as well as logistics routes under construction connecting Gwadar Port in the Arabian Sea with the Xinjiang region in China’s northwest. Xi told Sharif that their two countries should focus on promoting the joint construction of the China-Pakistan Economic Corridor, and Chinese and Pakistani firms 31 memoranda of understanding covering technology, agriculture, trade, energy, coal and gasification, according to Pakistan’s commerce ministry. But the Chinese leader also called on his guest to step up efforts to ensure the security of Chinese projects in the country. PM Sharif pledged to ensure the safety of Chinese workers in Pakistan. The China-Pakistan Economic Corridor includes building and improving roads and rail systems to link western China’s Xinjiang region to Pakistan’s Gwadar port on the Arabian Sea. It is part of Xi’s Belt and Road Initiative to increase trade by building infrastructure around the world. Beijing is willing to work with Islamabad to build an upgraded version of an economic corridor linking the two countries. China has emerged as Pakistan’s largest lender with a credit of $27 billion to the country. The World Bank comes a distant second with $14 billion, while ADB has lent $13 billion. There is a link between IMF lending and Chinese credit. The IMF wants to be sure that the fresh money it injects into Pakistan’s economy is not simply used to clear up China’s dues. This requires a Chinese commitment to roll over existing debt payments. The IMF wants this to be done not simply till the year’s end, but until the end of the 3-year credit facility Pakistan is seeking. Pakistan’s current year budget is based on a growth projection of 3.5 %. The country follows a July-to-June budget cycle. Borrowing is needed not simply to cover the balance of payments gap, but to finance the budget. The prospect of launching the second phase of the CPEC. The first phase was touted to bring $46 billion. Instead, the net inflow was $25 billion. Pakistan would like China to finance a second phase for the upgrading of the CPEC. CPEC deals with long-term programs and projects. This is not a panacea for Pakistan’s economic problems which require budget support and balance of payment in the short run. Most of CPEC funding is in the form of credit, not investment. This generates more debt payments. Whereas, China extracted major concessions from Pakistan on issues of core interest to it. Pakistani support for the Chinese position on Taiwan has been part of the previous statements as well. Both sides stressed that the authority of the UN General Assembly Resolution 2,758 brooks no dispute or challenge. This resolution, asserting the One China position, was adopted by the world body in 1971, when China joined the United Nations. As China steps up military pressure on Taiwan, it is looking for allies to buttress its diplomatic position. Pakistan has been recently elected to the UN Security Council as a non-permanent member for two years – from January 1, 2025 until December 31, 2026. This will give Pakistan new opportunities to encash its position in the UNSC for shoring up its collapsing economy. This will also expose it to conflicting pressures from its all-weather friend and the US, which has a veto on IMF approval of any new package for Pakistan. In a series of trips over the past three months, Pakistan has tried to convince the debt-strapped country’s three closest allies — China, Saudi Arabia and the United Arab Emirates — to invest in the nation, as its precariously positioned economy looks for green shoots. In June last year, under the leadership and vision of Army Chief General Asim Munir, the government formed a Special Investment Facilitation Council (SIFC), a high-powered body comprising Pakistani civilian and military leaders, to promote investment in Pakistan. Following the tours to Beijing, Riyadh and Abu Dhabi, the government is pointing towards a raft of memorandums of understanding signed on those trips as indicators of potential investment coming to Pakistan. However, the attempts to get foreign direct investment (FDI) will work only in a stable political landscape and bring structural reforms to its economy. After taking office in March for the second time, the PM paid two visits to Saudi Arabia in April. In his two meetings with Saudi Crown Prince Mohammed bin Salman in April, Sharif discussed opportunities to enhance economic cooperation between the two countries and explored the possibility of a $5bn investment package. Both countries have identified areas of cooperation, both at the government-to-government and business-to-business levels, and that has been clearly identified. Pakistan had laid out possibilities for Saudi investment in six different fields, including an oil refinery project, agriculture, mining, power sector, technology and aviation.

Indeed, China-Pakistan Friendship is a Rock-Solid partnership endures as leadership strengthens bilateral bonds, and a legacy of trust which Celebrates unwavering cooperation and mutual support for each other.

There is no question that Pakistan needs investment. Just 18 or so months ago, we were on the verge of default, but because of these dialogues and engagement with friendly countries, we are letting them know what we can offer and have hope that Riyadh would invest from its Public Investment Fund (PIF), the kingdom’s sovereign wealth fund with estimated assets of more than $900bn. They are obviously seeking investment opportunities. PM Sharif followed up his Saudi visits by making a one-day visit in late May to the UAE, another long-term partner for the country, during which he met President Sheikh Mohammed bin Zayed Al Nahyan. Following the meeting between the leaders, the Pakistan Prime Minister’s Office announced that the UAE had committed to $10bn in investment in Pakistan in various fields. The UAE Ministry of Investment confirmed the pledge. The last 10 years have seen Pakistan’s reliance on China growing significantly, as the relationship, which was once centred on military ties, has expanded into the economic arena in a big way: Pakistan owes China nearly $30bn out of its total foreign debt obligations of nearly $130bn. The country’s economic managers have emphasised that unless there is significant foreign investment, Pakistan will not be able to meet its ambitious 3.6 per cent growth rate, which the country has targeted for the next fiscal year. Both Chinese and Pakistani governments also issued statements about increased focus on security, as well as forging an upgraded version of CPEC to better help Pakistan’s economic and social development. Ever since the creation of the SIFC last June, the government has credited the organisation with helping facilitate investment opportunities from outside the country. The latest available central bank data reveals that from July to April this year, Pakistan received $1.45bn in investments, an increase of a paltry 8.1 per cent from last year. However, the three recent visits showed Pakistan’s desperation to attain financial support, whether in the form of bank deposits or investment projects, the failure to realise the projects substantially was due to Pakistan’s volatile landscape. The fundamental issue for Pakistan remains the question of the broader environment within the country. At a time when domestic businesses are hesitant to invest in the economy, foreign capital will be even more conservative. For Pakistan to attract capital flows, it must embark on holistic reforms and provide a credible roadmap that excites domestic and foreign investors. The increasing attacks on law enforcement officials in the last 18 months have added another layer of challenge to the country’s overstretched military, which has to man both its eastern border with archrival India and its western border with Afghanistan. Pakistan is evidently working in concert for a wider investment plan in the country. Pakistan is talked about as a country with Saudi software coming on Chinese hardware, and now the connections are becoming clearer, however, the three countries Sharif visited also happen to be the largest bilateral creditors to Pakistan. The state should be focused on finding a way to make large government-to-government deals happen. The problem is, that Pakistan need cash support at this time, and these deals, even if they come, will not bring much cash. The best way out of the current economic difficulty for Pakistan is domestic reforms, along with foreign support. Realistically, Pakistan should try to manage its external debt profile rather than seek more cash-based support from its bilateral creditors. The foreign visits have developed a political aspect where the optics are used by the Pakistani governments as signs of international trust and support but some focus on domestic investors must be paid to revive the economy. FDI certainly remains an important component of economic expansion and growth; however, the government could have started by facilitating local investors and businesses to develop a roadmap that could then be offered to foreign investors. In such conditions, Prime Minister Shehbaz Sharif along with  Army Chief General Asim Munir’s visit to China demonstrates the long-standing strength and vigour of the China-Pakistan relationship. It emphasises the mutual trust, strategic alignment, and shared vision that has defined this cooperation for decades. As both countries face the challenges of the twenty-first century, their commitment to expanding collaboration and creating a shared future is strong. The visit has paved the way for the next phase of China-Pakistan ties, which will include increased economic cooperation, strategic coordination, and a shared commitment to regional and global stability. With the second phase of CPEC on the horizon and new collaboration opportunities emerging, the future seems bright for an all-weather strategic cooperative relationship. Indeed, the China-Pakistan Friendship is a Rock-Solid partnership that endures as leadership strengthens bilateral bonds and a legacy of trust which Celebrates unwavering cooperation and mutual support for each other.

By admin

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